Why Women Pay THOUSANDS of Pounds More to Borrow Money Than Men Due to the Gender Credit Gap
WOMEN could pay thousands more than men when borrowing money from what has been dubbed the “gender credit gap”, said a credit reference agency.
Lower credit scores among women mean they have to pay Â£ 17,000 more in interest on financial products like mortgages, credit cards and unsecured loans over their lifetimes, research shows.
Women are already fighting to close the gender pay gap, which researchers have found to increase during the pandemic due to job loss.
Research has also found that women are harmed by the UK pension system, retiring 55% less than men on average.
How to improve your credit score
WE explain how to improve your credit score.
- Don’t make too many credit requests – Making a lot of requests in a short period of time can be seen as a sign of financial distress – and each request will be recorded in your file. Use a soft-search eligibility calculator to show the likelihood of you being accepted.
- Always pay your bills – Late payments are also recorded on your file, so make sure you pay your monthly bills on time, including utilities and credit cards.
- Pay off your debt – Try to reduce your existing debt before applying for new credit, as lenders may be reluctant to lend you if you already have significant debt.
- Use a manufacturer’s credit card – These cards tend to have high interest rates compared to normal cards, but if you can show that you are a responsible spender with them, it can improve your odds in the eyes of lenders.
Today, financial services firm Credit Karma claims to have found evidence of a “gender credit gap.” Here we explain how:
How big is the âgender credit gapâ?
Credit Karma found that their female users have an average credit score of 652 compared to an average of 702 among their male counterparts.
The researchers then looked at data from the Bank of England on financial products that consumers buy – like auto finance, mortgages, credit cards and unsecured loans.
From there, they determined the amount of interest consumers should pay on these products throughout their lives based on their credit score.
They found the cost of the lifetime loan for women to be Â£ 152,403 due to their lower credit scores.
This compares to Â£ 135,490 for men – a difference of Â£ 16,913.
Why do women have lower credit scores?
Women may have lower scores because they are less likely to use products that help build their credit profile, according to a survey of 1,012 UK adults conducted by Qualtrics Research between February 16 and March 5, 2021.
Almost a third of women (31%) declared all or part of their financial arrangements on behalf of their partner, according to the study.
This means that they may not have the same credit profile as men and sometimes have no credit rating.
The survey also found that women are less likely to access products that would positively impact their ratings, including personal loans, credit cards and mortgages.
Instead, 25% of women are more likely to borrow money with buy it now and pay later programs that don’t affect credit scores, compared to 19% of men.
Meanwhile, the gender credit gap could widen further due to the pandemic.
Research has found that 20% of women report being made redundant or on leave compared to 14% of men.
Another factor is that women (32%) are more likely to have seen their income decline in the past year than men (30%).
Akansha Nath, Head of Partnerships at Credit Karma, said: âThe past year has been incredibly difficult for everyone, but it is worrying that women are disproportionately affected in the long term.
âThere is no reason why borrowing should be more expensive for women than for their partners, but there are a number of simple solutions that can make it more attractive to lenders. “
Nath added that Credit Karma encourages women to take a more hands-on approach to managing their money after their research found that 41% had not checked their credit score compared to 35% of men.
Martyn James, money expert at Revolver, told The Sun that the gender credit gap âdefinitelyâ exists.
But he added that in many cases, technical details like which name appears first on a couple’s joint account can have an impact.
He said: âIt has been known for many years that women financially lose vital sources of money like credit due to technical issues, to be second on common policies like mortgages or credit cards or to n ‘not being the main source of household money.
“It’s not enough to pretend to talk about these differences. Credit providers need to take these differences into account to ensure that women don’t lose out just because they are women.”
Women can expect to have on average Â£ 100,000 less in private retirement funds, according to Scottish Widows.
Martin Lewis explains 7 things you need to know about your retirement, including a tip for figuring out how much to save.
We’ve also put together a comprehensive guide on how to improve your credit score.